CAL to acquire stake in fund manager Asia Frontier Capital for $25m

The acquisition will be made through CAL’s Singapore-based subsidiary, CAL Global Pte Ltd, under an agreement signed with AFC at CAL’s headquarters in Sri Lanka.

Infographic: TBS

Capital Alliance Holdings PLC (CAL), the Sri Lankan parent company of CAL Bangladesh, is set to acquire a 51% stake in Hong Kong-based fund manager Asia Frontier Capital Ltd (AFC) for $25 million, strengthening its presence in international frontier markets and potentially bringing greater focus to Bangladesh as an investment destination.

The acquisition will be made through CAL’s Singapore-based subsidiary, CAL Global Pte Ltd, under an agreement signed with AFC at CAL’s headquarters in Sri Lanka today (2 November), according to a disclosure made in Colombo Stock Exchange.

CAL Bangladesh officials said the deal could help attract greater foreign investment to Bangladesh’s capital market, as major international fund managers typically diversify their portfolios across different markets while managing investments from financial hubs such as Singapore.

With CAL taking a controlling stake in AFC, Bangladesh could receive greater attention from international investors through the expanded investment platform, they said.

The proposed acquisition marks a significant step in CAL’s international expansion, extending its geographical footprint and strengthening its expertise in frontier-market investing, according to a press release.

The partnership will connect CAL’s operations in Sri Lanka, Bangladesh and Singapore with AFC’s established investment platform in Hong Kong and its teams in Vietnam, Uzbekistan and Iraq.

The expanded network is expected to strengthen the group’s ability to combine local market knowledge with international investor access. It will also provide a broader platform for channelling international capital into frontier markets and expanding investment opportunities for investors across the group’s existing markets.

Commenting on the proposed acquisition, CAL Group CEO Kanishke Mannakkara said frontier markets offered some of the world’s most compelling growth opportunities but remained difficult for international investors to access.

“This partnership changes that,” he said, adding that the deal would give CAL access to three additional frontier markets and a presence in Hong Kong, one of the world’s major financial centres.

“Together with AFC, we will serve as a conduit for international capital to access frontier markets and, just as importantly, for investors in our markets to access opportunities across the frontier and beyond,” Mannakkara said.

He also praised AFC founder Thomas Hugger and his team for building a respected investment management business over more than a decade, saying CAL was looking forward to developing the next phase of the partnership.

Welcoming the acquisition, Thomas Hugger said frontier markets required local knowledge and patience, qualities he believed CAL brought to the partnership.

He said AFC’s investors would continue to benefit from the same investment approach, team, processes and independent decision-making despite the change in ownership.

CAL would bring research and data capabilities in markets where information was scarce, long-standing expertise in frontier fixed-income markets and relationships with investors across South Asia, he said.

The backing of a listed and well-governed group would also strengthen AFC’s compliance, technology and operational infrastructure as it expands, Hugger added.

Founded in 2013 by Hugger, AFC manages approximately $125 million in assets for investors across Europe, Asia and North America. Its portfolio includes the multi-country AFC Asia Frontier Fund and dedicated investment funds focused on Vietnam, Iraq and Uzbekistan.

AFC has also been a longstanding investor in Sri Lankan and Bangladeshi equities, building experience in both markets and establishing a reputation as an international investor specialising in frontier economies.

Established in 2000 and listed on the Colombo Stock Exchange, CAL is a full-service investment bank and capital markets solutions provider headquartered in Colombo. Its services include investment banking, asset and wealth management, fixed income, stockbroking and research.

The company manages assets exceeding $1.2 billion across Sri Lanka and Bangladesh.

In Bangladesh, CAL operates through CAL Securities Limited, a licensed stockbroker, and CAL Investments Limited, a licensed merchant bank. Its services include mergers and acquisitions advisory, wealth management and capital markets solutions.

According to the press release, CAL and AFC plan to explore expanding AFC’s product range to include frontier fixed-income products and country-specific investment strategies, subject to applicable regulatory requirements.

In an email response to TBS, Hugger reiterated that AFC’s existing investment management approach and independence would remain unchanged under the new ownership.

He said the partnership would provide AFC with the backing of a larger, well-governed group while strengthening its compliance, technology and operational capabilities, enabling the fund manager to pursue further growth across frontier markets.

Source: The Business Standard